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Air fares set to rise amid Jet crisis
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SME Times News Bureau | 15 Apr, 2019
The 2019 summer holiday travel season is expected to be marred by high
air fares as debt-ridden Jet Airways gradually truncates flight
operations, experts said.
Even though the airline, lenders and
the government are still hopeful of a revival, the current trend might
see Jet operating a bare minimum fleet, thus bumping up air fares.
"The
grounding of aircraft due to liquidity issues with Jet Airways and
regulatory directive for the grounding of B737 Max aircraft have
resulted in 15 per cent impact on the industry capacity," said Kinjal
Shah, Vice President, Corporate Ratings, ICRA.
"This has
definitely resulted in passenger inconvenience. Furthermore, it has
resulted in a significant increase in fares. With the industry capacity
remaining constrained, the fares are expected to remain high in the near
term."
Jet's woes assume criticality as the airline which once
operated around 120 aircraft is left with just 16 in its fleet. Last
Friday it operated 11 aircraft.
The airline has currently
suspended international operations till the weekend. It has also
cancelled domestic flights, leaving passengers stranded at various
airports. This led even the Prime Minister's Office (PMO) to assess Jet
Airways' financial situation.
"With Jet now cancelling
international flights, the rising fare situation is set to get worse if
capacity is not increased before peak summer travel season," said Aloke
Bajpai, CEO and Co-founder, ixigo.
"A comparative analysis of
April 2019 fares and what the scenario was last year shows that fares
for flights originating from Delhi have increased by 19 per cent and
fares for flights from Mumbai are up by 36 per cent. Passengers who are
planning their summer leisure travel will also be impacted due to
availability of seats."
According to Sharat Dhall, COO (B2C),
Yatra.com said: "With the peak travel season having kicked off, we
expect airlines to induct more aircrafts to tap into the increased
demand on the key business and leisure routes."
"This will also
result in a rationalisation of air fares and we expect them to increase
only marginally as compared to the same season last year."
In
addition, Dhall said: "We see other carriers adding capacity on a daily
basis to fill the demand-supply gap and that is keeping fares under
control."
"It is only the last-minute fares that are seeing a
jump. So it is unlikely to impact the summer vacation travel season as
most leisure travellers book well in advance and will not be impacted."
The
trend of high air fares that was triggered due to Jet's truncation of
its operations was amplified by oil marketing companies, as they
increased the price of aviation turbine fuel (ATF).
Since March
14, passengers had to shell out high fares as several more flights were
cancelled due to grounding of Boeing 737-MAX aircraft.
Culmination of these factors are expected to decelerate the growth of air passenger traffic in the country.
In
a recent note, ratings agency Fitch said that Indian aviation market
has seen a sharp increase in air fares in the last few months due to
tight supply, which has been worsened by the suspension of the 737 MAX
aircraft.
"Fitch expects the growth in revenue passenger
kilometres (RPK), which decelerated to 12.4 per cent in January (2018:
19.9 per cent), to weaken further until supply increases," the rating
agency said in a note.
In addition, the note said that Jet
Airways, which along with its subsidiary JetLite, had the second-largest
share of the domestic market until January, has been steadily losing
market share as it has been forced to shrink its operating fleet due to
financial troubles.
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